Mohnish Pabrai’s appetite for Indian stocks has been whetted by the magnificent 10-bagger gains that he effortlessly snared. He is now dumping his portfolio of USA stocks and buying high-quality Indian stocks. No doubt, the strategy is very sensible and should be emulated by all deep-pocketed foreign investors

Purge of foreign stocks from portfolio

Mohnish Pabrai lives in California. However, his heart is in Dalal Street.

Mohnish candidly admitted to the members of his PMS Funds that he is smitten by Indian stocks.

“I love what we own in India. We’ll make a lot of hay from our Indian holdings in the years ahead,” he said.

At the same time, he was dismissive about foreign stocks.

“I don’t find the U.S. markets overvalued, but they aren’t obviously undervalued either. The pickings in the U.S. have been very slim.”

The result is that Mohnish has been slowly and steadily dumping the foreign stocks in his portfolio.

According to the sleuths of seeking alpha, Mohnish now has only two foreign stocks in his portfolio, namely, Fiat Chrysler and Ferrari.

Three stocks were put on the chopping block. These are Alphabet Inc., Southwest Airlines and AerCap Holdings.

(Image credit: Seeking Alpha. Click for larger image)

Due to this, the portfolio value has plunged from $386M to $317M.

It is anybody’s guess how long Fiat Chrysler and Ferrari will retain their coveted position in Mohnish’s portfolio.

We shouldn’t be surprised if one fine day he unceremoniously dumps these stocks as well!

Latest stock pick – Repco Home Finance – “No Brainer” HFC Stock

“As India rises, it is a no-brainer that people will want good housing and it is a no-brainer that they will have to finance it because there is no way that they can just buy it with their income levels …..

…. The housing finance sector will grow at 3 or 4 times GDP growth. So, if India is growing at 7%, the housing companies may be growing at 20 to 30%”.

Prof. Bruce Greenwald, the eminent global authority on value investing, was one of the dignitaries on the dais.

While Prof. Greenwald may not be familiar with Indian stocks, he knows good value when he sees it. He vigorously nodded his head in affirmation of Mohnish’s theory.

(Click on image to view video)

Top-secret buying of Repco

Mohnish normally likes to come personally to Dalal Street and buy his entire quota in a bulk deal.

However, in the case of Repco Home Finance, Mohnish was keen to keep his buying a secret.

He roped in six of his funds named Pabrai Investment Fund II LP, Pabrai Investment Fund 3 Ltd, The Pabrai Investment Fund IV LP, Dhando India Zero Fund LP, Dhando India Zero Offshore Ltd, Dhando Holdings LP and Dhando Holdings Qualified Purchaser LP, to buy small bits and pieces of the stock so as to fly under the radar.

Of course, Mohnish’s attempt at secrecy was futile because it is not possible to keep anything a secret from the ace sleuths of the RJ Fan Club for too long.

We tracked down the official disclosure made by Mohnish to the BSE which reveals all details of his purchases.

As of date, Mohnish holds a treasure trove of 32,31,728 shares of Repco comprising 5.16% of the equity capital.

The investment is worth Rs. 184 crore at the CMP of Rs. 568.

Repco Home Finance will be a multibagger: Basant Maheshwari

Basant Maheshwari was the first discoverer of Repco Home Finance’s potential.

“Against its issue price of Rs172, the stock is currently trading at Rs 292, translating to 12 times estimated FY15 earnings per share of Rs 25 and at around 2.1 times projected FY15 book of around Rs 140.

Given the reasonable valuation and enough room for growth, the stock should do well in 2014 and appears to be a potential multi-bagger.”

Repco surged to an all-time-high of Rs. 725 on 8th January 2018, fulfilling Basant’s prophecy of multibagger gains.

It is presently resting at Rs. 568.

Basant has since shifted his allegiance from Repco to PNB Housing Finance.

However, this has no consequence because Basant regards stocks as “tickets to creating wealth” which are swappable with each other.

We learn with time & one learning is that most things are expensive for a reason.Though the returns of Page from our ‘exit’ is only 19% cagr it’s worth it as one didn’t lose sleep making that 19%. But if stocks are just tickets to creating wealth it’s ok swapping one for another. https://t.co/zutsy5FqrQ

Incidentally, Dolly Khanna’s portfolio has two spectacular agriculture stocks in it being GNFC and LT Foods (Daawat). Both are also mega multibagger stocks and are likely to enrich her further in the future.

That there is a massive and insatiable demand for branded and hybrid seeds is quite evident from the following data:

“Industry Overview

– The Agriculture sector commands the largest share of the country’s total land area at about 48% (or 156 million hectares) compared to USA’s 18% (or 158 million hectares) and China’s 15% (or 106 million hectares). While India has more arable land than China, its production is only half that of China

– The reasons for the lower productivity are low usage of high quality seeds, fertilizers, pesticides, lower farm mechanization, weak credit facilities, shortage of water and energy

– The organized Indian seed industry has been in existence since 30+ years; however the last decade has witnessed exponential and transformational growth

– The Indian Seed Industry is the 6th largest in the world in value terms accounting for about 4.5% of global industry preceded by the US (27%), China (22%), France (6%), Brazil (6%) and Canada (4.8%)

– In volume terms consumption has seen a CAGR of 8.4% from FY09 to FY15 to reach 3.5 million tonnes

– Use of branded seed and hybrid seed has been consistently increasing, Seed Replacement Rate (SRR) on the rise”

It is also claimed that Kaveri Seed has a “moat” and the same is depicted by this image.

Cash reserves of Rs. 500 crore

Kaveri Seed is not only debt-free but has a massive cash reserve of Rs. 500 crore.

According to the ET, the Company has an ambitious game plan of expanding its business in high-margin non-cotton segment that include rice, maize and vegetable seeds by buying the latest technology.

It is also aiming for at least 20-25% annual topline growth over the next three-five years.

C Mithun Chand, the ED, revealed that due to focus on high-margin non-cotton business, there would be an attractive profit growth of 200-300 basis points more than the growth in topline.

He also indicated that the company could surpass Rs 1,000 crore mark in annual revenues in the next couple of years.

What about Nath Bio-Genes?

At this stage, we have to note that Billionaire Satpal Khattar has loaded on to Nath Bio-Genes, Kaveri Seed’s arch rival in the genetic seeds business.

I am listing out here the fundamental features of a few well known stock advisory services. The fees charged, as well a few stocks that they are credited with having recommended, are set out. If you know of other service providers, do chip in. Also, if you have used any of these services and have […]

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